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Parker Reports Q1 Earnings of $1.09; 84 Cents After Unusual Items

October 17, 2000

CLEVELAND, Oct. 17 /PRNewswire/ -- Parker Hannifin Corporation today reported first-quarter net income for the period ended September 30, 2000 of $125 million, or $1.09 per diluted share, on record first-quarter sales of $1.48 billion. Last year, the company earned $73.6 million, or 67 cents per diluted share, on sales of $1.24 billion. The current period's results include the net effect of a one-time gain on the sale of real estate and certain asset write-downs. Excluding these items, the company increased earnings by 31 percent, to 84 cents per diluted share, on a sales increase of 19 percent.

(Photo: http://www.newscom.com/cgi-bin/prnh/19990816/PHLOGO )

Recent acquisitions, including Commercial Intertech, Gresen and Wynn's International, contributed much of the sales increase, while the company also noted continuing strength in the semiconductor, telecommunications and filtration markets.

Profits were up substantially in all of the company's business segments, led by a 131-percent jump in operating income and a 7.8-percent return on sales in the International Industrial business. The international results reflect particular strength in the Asia-Pacific region and Latin America, and also improving margins in Europe, which were tempered somewhat by the results of recent acquisitions. Without these acquisitions, the International Industrial segment achieved a 9.2-percent return on sales. Last year's international margins were 6.8 percent without non-recurring items.

Operating income in the North American Industrial segment was 25-percent higher, primarily reflecting recent acquisitions, while Parker Aerospace posted a 26-percent increase on a two-percent decline in sales, with continued strength in the regional jet market and aftermarket business. Without last year's non-recurring items in Aerospace, margins increased 12 percent.

"It was another great quarter, across the board," said Chairman and CEO Duane Collins. "We're especially encouraged to see some positive results from the steps we took last year to improve our profitability in Europe, because we've been working on this for a couple of years now, and the business climate isn't making it easy. Despite choppy demand, a weaker Euro and the need to integrate operations we acquired there, the margins in our European business are moving in the right direction. And we're not done yet." Collins said the net amount of charges the company expects to record in operating alignments during succeeding quarters will largely offset the first-quarter gain realized on the sale of California real estate, which amounted to 30 cents per share. He added that teams have been identified to lead operating improvements designed to further enhance margins, with the aim of accelerating lean manufacturing initiatives on a global basis; integrating acquisitions; and improving logistics in Europe.

"We have the financial and operational capacity to be the pacesetter in our industry," said Collins. "The acquisitions we've made in the past year are meeting and exceeding our expectations, and with the opportunities we have this year to further improve our returns, we are in an excellent position to achieve the accelerated growth objectives we've set for the near term."

With annual sales of $6 billion, Parker Hannifin is the world's leading diversified manufacturer of motion and control technologies and systems, providing precision-engineered solutions for a wide variety of commercial, mobile, industrial and aerospace markets. The company employs more than 45,000 people in 46 countries around the world. For more information, visit the company's web site at www.parker.com , or its investor information site at www.phstock.com .

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call to discuss its fiscal first-quarter results is available to all interested parties via live webcast at 10 a.m. ET, on the company's investor information web site, www.phstock.com. To access the call, click on the "Live Webcast" link. From this link, users may also complete a pre-call system test and register for e- mail notification of future events and information available from Parker.

Forward-Looking Statements:

Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. All statements regarding future performance, events or developments are forward-looking statements. It is possible that the company's future performance may differ materially from current expectations expressed in these forward-looking statements, due to a variety of factors such as changes in: business relationships with and purchases by or from major customers or suppliers; competitive market conditions and resulting effects on sales and pricing; increases in raw-material costs which cannot be recovered in product pricing; and global economic factors, including currency exchange rates and difficulties entering new markets.


    (Unaudited)                               Three Months Ended September 30,
    (Dollars in thousands except
      per share amounts)                              2000           1999

    Net sales                                     $1,477,366    $ 1,242,293
    Cost of sales                                  1,151,264        976,621
    Gross profit                                     326,102        265,672
    Selling, general and administrative expenses     162,441        138,148
    Income from operations                           163,661        127,524
    Other income (deductions):
      Interest expense                               (21,168)       (14,543)
      Interest and other income (expense), net        51,377           (624)
      Total                                           30,209        (15,167)
    Income before income taxes                       193,870        112,357
    Income taxes                                      68,824         38,763
    Net income                                      $125,046        $73,594
    Earnings per share:
      Basic earnings per share                         $1.10           $.67
      Diluted earnings per share                       $1.09           $.67

    Average shares outstanding during
      period - Basic                             113,929,685    109,069,288
    Average shares outstanding during
      period - Diluted                           114,561,981    110,094,722

    Cash dividends per common share                     $.17           $.17

    (Unaudited)                               Three Months Ended September 30,
    (Dollars in thousands)                            2000          1999
    Net sales
        North America                               $876,250       $667,669
        International                                330,728        298,463
      Aerospace                                      270,388        276,161
    Total                                         $1,477,366     $1,242,293

    Segment operating income
        North America                               $117,191        $93,683
        International                                 25,877         11,212
      Aerospace                                       44,276         35,048
    Total segment operating income                   187,344        139,943
    Corporate general and administrative expenses     17,384         14,113
    Income from operations before interest
      expense and other                              169,960        125,830
    Interest expense                                  21,168         14,543
    Other                                            (45,078)        (1,070)
    Income before income taxes                      $193,870       $112,357

    (Unaudited                                            September 30,


    (Dollars in thousands)                             2000           1999

    Current assets:
    Cash and cash equivalents                        $55,190        $64,421
    Accounts receivable, net                         953,904        739,682
    Inventories                                    1,027,213        920,843
    Prepaid expenses                                  34,741         21,141
    Deferred income taxes                             86,754         65,907
    Assets held for sale                             241,667              -
    Total current assets                           2,399,469      1,811,994
    Plant and equipment, net                       1,435,642      1,207,012
    Other assets                                   1,494,615        751,356
    Total assets                                  $5,329,726     $3,770,362

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                                   $596,109        $59,462
    Accounts payable                                 360,787        288,521
    Accrued liabilities                              419,789        308,951
    Accrued domestic and foreign taxes               109,832         84,159
    Total current liabilities                      1,486,517        741,093
    Long-term debt                                   953,434        717,599
    Pensions and other postretirement benefits       303,909        280,101
    Deferred income taxes                            111,401         32,813
    Other liabilities                                 80,295         68,582
    Shareholders' equity                           2,394,170      1,930,174
    Total liabilities and shareholders' equity    $5,329,726     $3,770,362

    (Unaudited)                               Three Months Ended September 30,
    (Dollars in thousands)
                                                      2000           1999

    Cash flows from operating activities:
    Net income                                      $125,046        $73,594
    Depreciation and amortization                     67,432         53,203
    Net change in receivables, inventories,
      and trade payables                            (124,443)       (19,438)
    Net change in other assets and liabilities       (12,921)        16,542
    Other, net                                       (35,150)        (6,115)
    Net cash provided by operating activities         19,964        117,786
    Cash flows from investing activities:
    Acquisitions (less cash acquired of
      $5,240 in 2000)                               (485,923)        (3,007)
    Capital expenditures                             (66,083)       (50,124)
    Other, net                                        71,958        (11,980)
    Net cash used in investing activities           (480,048)       (65,111)
    Cash flows from financing activities:
    Net proceeds from common share activity            1,725          1,871
    Net proceeds from (payments for) debt            466,007         (3,526)
    Dividends                                        (19,361)       (18,521)
    Net cash provided by (used in)
      financing activities                           448,371        (20,176)
    Effect of exchange rate changes on cash           (1,557)        (1,355)
    Net (decrease) increase in cash
      and cash equivalents                           (13,270)        31,144
    Cash and cash equivalents at beginning of period  68,460         33,277
    Cash and cash equivalents at end of period       $55,190        $64,421

SOURCE Parker Hannifin Corporation

CONTACT: Media, Lorrie Paul Crum, VP - Corp. Communications, 216-896-2750, or lcrum@parker.com , or Financial Analysts, Timothy K. Pistell, Treasurer, 216-896-2130, or tpistell@parker.com , both of Parker Hannifin Corporation/

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